Here we are at the end of 2022, and it’s been an interesting year for the real estate market in Philadelphia.
We aren’t unique. The real estate market has been pretty wild in Delaware, New Jersey, and across the country. The high prices, high demand, and low inventory in the sales market has also impacted the rental market.
Let’s take a look at where we are and what you can expect if you’re a homeowner or an investor with rental properties.
Watching for Shifts in the Market
It’s easy to look at the real estate market on a macroeconomic level, but it’s not really about that. Real estate is hyper local, and while there are a number of nationwide trends that are hard to ignore, it’s important for homeowners and investors to focus on local markets and their nuances.
You’ll be in an especially strong position if you can predict the future.
Most of us can’t, of course. We don’t have a crystal ball and while we are carefully tracking shifts in the market, we don’t really know what’s coming down the pike. We’re making estimations based on what markets have done before, what we expect the real estate landscape to look like in the future, and how consumers are responding to inflation, higher prices, and a little bit of uncertainty.
Re-think Selling a Philadelphia Home Now
A year ago, everyone was selling. Prices were high, inventory was tight, and if you had a home that you were ready to move on from, it was a perfect time to sell for asking. Probably above asking.
Price points are still high if you look at the market today. But you’ll also notice that time on the market is longer. Homes aren’t moving as quickly as they did a little while ago. There are fewer bidding wars. Less of a willingness among buyers to make offers over the asking price.
There are also higher interest rates to consider. Anyone buying a home with a traditional mortgage will find themselves paying more to borrow the money. That’s slowing things down on the sales market.
If your home isn’t already on the market and you’ve been thinking about selling it, you might want to wait. The window for your best opportunity is closing very quickly.
This doesn’t mean you can’t make money on that property.
Renting Out a Philadelphia Property
There are some good reasons not to sell your home at the end of 2022. Instead, you should rent it out. Becoming an accidental landlord sounds scary, especially if you don’t like accidents and you never thought of yourself as a landlord.
But, the rental market is expected to stay strong. Because buying a home is so cost-prohibitive for a lot of people, they’ll remain as renters for longer. You’ll have a large pool of well-qualified renters who are ready to lease your home. They’ll pay rent every month, take care of your property, and help you pay down the mortgage. By the time the market recovers and you’re ready to sell, you’ll have a lot more equity.
Being a landlord also means you can take advantage of some generous tax breaks. You can deduct the cost of interest, depreciation, maintenance, and professional services like property management. You don’t have to worry about the headaches that come with being a landlord. Partner with a professional Philadelphia property management company to lease, manage, and maintain your home.
Economic Realities and the Real Estate Market
As the market begins to cool and prices begin to drop or stabilize, we don’t expect this to be anything like 2008. But it is going to shift to a tighter market, which puts potential sellers in a difficult position. If you own a condo, you’re in an especially vulnerable position. Those values have dropped more significantly, and they make much better rentals.
The higher interest rates are meant to slow down inflation. They will also slow down the pace at which the housing market is moving.
The good news is that rental homes flourish during a tighter sales market and even through recessions and downturns. You’ll see a lot of people deciding to rent out their properties rather than selling them for less than they’re willing to accept.
One class of investors who will benefit from this market is cash investors. If you’re planning to buy properties in cash, you’re going to have more opportunities.
If you’re seizing on this opportunity to grow or diversify your existing real estate portfolio, you should be looking for leads. Networking and relying on the information provided by local housing experts will help you navigate the current market and make some progress.
We always talk about the importance of a good real estate agent, especially now when the market is shifting. You also need a property manager who can tell you what types of rents you can expect from a particular property and how long it will take you to get that home rent ready. Maintenance costs are rising, so you’ll also rely on their expertise to help you budget for repairs.
Talk to other professionals as well. Keep your network close. If something is about to be listed that might work for you, it’s important that you know about it as soon as possible. Stay in touch with agents, Realtors, brokers, lenders, construction companies, and vendors. Get online and search the listings whenever you can. Check for auctions.
This is a good market for investors, and a changing market for homebuyers and homeowners. Depending on where you are and what you’re hoping to accomplish, you’ll need a strategy for getting through it.
We’d love to strategize with you. Let’s talk about your property, your home, and what you want to do with it as the market begins to change. Contact our team at TCS Management.
TCS Management is a full service property management company headquartered in Philadelphia, Pennsylvania, also serving Harrisburg, PA, Cherry Hill, NJ, Wilmington, Delaware and the surrounding areas. We focus on single-family and multifamily residential property management of homes, condos, townhomes, and apartment buildings.
